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2013 (9) TMI 215 - HC - Central ExciseCENVAT Credit Storage of Inputs outside the factory premises - Applicability of Rule 57 (A) (B) (1) Whether the duty having been paid on the inputs stored outside the factory premises which was received in the factory, the tribunal was not justified in not considering Rule 57 (A) (B) (1) for the purposes of CENVAT credit - Whether the principle of law i.e.,the applicability of Rule 57 (A) (B) (1) being absolutely the same - Whether the tribunal was not justified in holding that prior permission of the Commissioner was required for storing the inputs outside the factory premises when the circular not put such condition - Denial of CENVAT credit only on the procedural ground of lack of permission from the Commissioner without merits - Held that - Held that - Non-observance of procedural condition could not be a ground to deny the credit when there was no dispute regarding duty payment and the use of goods in manufacture of final products - MANGALORE CHEMICALS & FERTILIZERS LTD. Versus DEPUTY COMMISSIONER 1991 (8) TMI 83 - SUPREME COURT OF INDIA - unnecessary technicalities, which were matter of form and not one of the substance would not justify the level of permission - The CBEC circular was issued on the representations for availing MODVAT credit on material, which was not received directly inside the manufacturer s premise and which was required to be stored outside the factory premise and subsequently to the manufacturer s factory. The requirement under CBEC Circular was by way of relaxation to the mandatory provisions of storing the modvatable inputs inside the factory premises, which was the requirement of Rule 57AB (1) (d) - Any relaxation from the mandatory compliance of the Rules must be construed strictly - The CBEC relaxed the mandatory condition of storing the modvatable inputs outside the factory on specific grounds namely on account of shortage of storage space, hazardous nature of inputs or the like - The reasons for storage of modvatable inputs outside the factory could be many and thus the discretion of storing such goods outside factory premise was left to the Jurisdictional Commissioner, Central Excise, with a further condition that credit in such case will be taken in the books of accounts only when the entire inputs covered by invoice were received inside the factory for being put to use in production. The required permission was not taken from the Jurisdictional Commissioner of Central Excise - The CESTAT observed that admittedly the credit was taken while the inputs were still lying outside the factory unauthorisedly despite undertaking given by the assessee in their letter submitted to the Deputy Commissioner of Central Excise that they will take credit only when the total consignment covered under single invoice was received in the factory - Having failed to take the permission of the Jurisdictional Commissioner of Central Excise for relaxation to store the inputs from the Jurisdictional Commissioner of Central Excise and further availing the credit against its own undertaking given by the party in its letter - the appellant was not entitled to the input credit - There was no such statement of fact in the show cause notice, in the order of the order-in-original or the appellate authority that the inputs under single invoice were brought in the factory premises and were used in the manufacturing process before the credit was taken in the books of account. There was no error committed by the CESTAT in recording finding that the Commissioner (Appeals) had erred in law in allowing the credit to the assessee after holding that the appellant had not observed the procedure prescribed for relaxation to store inputs outside the factory premises - Decided in favour of revenue and against the party-appellant.
Issues Involved:
1. Justification of CENVAT credit of Rs.30,05,054 under Rule 57 (A) (B) (1). 2. Consistency in the tribunal's view regarding CENVAT credits of Rs.46,600 and Rs.30,05,054. 3. Requirement of prior permission from the Commissioner for storing inputs outside the factory premises. 4. Validity of the Show Cause Notice issued without prior permission from the Commissioner. Issue-wise Detailed Analysis: 1. Justification of CENVAT credit of Rs.30,05,054 under Rule 57 (A) (B) (1): The tribunal found that the CENVAT credit of Rs.30,05,054 was taken on inputs stored outside the factory premises without obtaining prior permission from the Commissioner, Central Excise, as required by the CBEC Circular dated 1.5.1996. The tribunal held that the credit could only be taken when such storage was made with prior permission and the goods were received inside the factory for manufacturing. Since the credit was taken while the inputs were still outside the factory, the tribunal allowed the revenue's appeal, denying the credit. 2. Consistency in the tribunal's view regarding CENVAT credits of Rs.46,600 and Rs.30,05,054: The tribunal found inconsistency in the application of Rule 57 (A) (B) (1) for different amounts. For Rs.46,600, the credit was denied because the inputs were not found in the registered factory premises, although they were duty-paid and used in manufacturing. For Rs.30,05,054, the credit was denied due to non-compliance with procedural requirements, despite the inputs being used in manufacturing. The tribunal's decision was based on the procedural breach rather than the substantive use of inputs in manufacturing. 3. Requirement of prior permission from the Commissioner for storing inputs outside the factory premises: The CBEC Circular dated 1.5.1996 required manufacturers to seek permission from the Jurisdictional Commissioner of Central Excise to store inputs outside the factory premises. The appellant had informed the Deputy Commissioner, Central Excise, about the storage due to space shortage but did not seek permission from the Commissioner. The tribunal upheld that the procedural requirement of obtaining permission was mandatory and the credit was rightly denied due to non-compliance. 4. Validity of the Show Cause Notice issued without prior permission from the Commissioner: The tribunal found that the Deputy Commissioner issued a Show Cause Notice after returning the application for permission, which was not considered proper. The Commissioner (Appeals) had allowed the credit, considering it an irregularity without allegations of misuse of inputs. However, the tribunal emphasized strict compliance with procedural requirements and upheld the denial of credit due to the lack of permission from the Commissioner. Conclusion: The tribunal dismissed the central excise appeal, upholding the denial of CENVAT credit of Rs.30,05,054 due to non-compliance with procedural requirements for storing inputs outside the factory premises without prior permission from the Commissioner. The questions of law were decided in favor of the revenue and against the appellant.
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